Survey shows Setas fail to release training funds

An analysis of the most recent annual reports of the 21 Sector Education and Training Authorities (Setas) has confirmed that they are failing to fulfil their primary objective – which is to release funds to employers who want to train their employees. Conducted by the SA Chamber of Commerce and Industry (Sacci), the analysis reveals that a huge amount of money is not moving out of the Seta coffers. And a large amount of cash in any kind of environment – whether commercial, government or non-profit – generally reflects poorly on the management of the organisation, and dormant funds should normally be put to better use, says the Sacci report. 21 reports by the Auditor-General (AG) were analysed – indicating that 16 investigations had place, mainly due to the mismanagement of funds – with the majority of these cases still on-going. Also, six of the Setas had not followed procurement procedures stated in the Public Finance and Management Act (PFMA). One training authority was cited for not following revenue management procedures and eight of the training authorities did not follow expenditure management procedures or failed to adequately develop them. In terms of internal controls, 10 of the SETAs did not meet all the requirements. The AG reports also indicated that 12 of the Setas did not have adequate leadership and financial controls. In addition five of them did not meet the governance requirements. Only four Setas had no matters of concern in their audit reports. The Sacci analysis of the 2011/12 annual reports by policy consultant, Pietman Roos, and marketing and policy assistant, Kananelo Sebati, was conducted to estimate the amount of dormant funds in each of the Setas – and cumulatively. “This,” said the team, “is important because the size and the most recent increase in these amounts is an accurate proxy of the poor service delivery by the Setas.” The data capturing exercise revealed that the 21 Setas had a total of just over R8 billion cash and cash equivalents on their balance sheets. The accumulated cash reserve amount increased by R1.7bn between the 2010/11 and 2011/12 financial years – a staggering 21.25% annual increase. Only two of the Setas showed a decrease in their cash reserves in the last financial year. The AG reports also listed a number of irregularities in 16 of the Setas ranging from “improper controls over daily and monthly reporting”, and “financial statements not being consistent with strategic plans”, to “irregular as well as fruitless and wasteful expenditure”. Five Setas reported wasteful expenditure that totalled R7.8 million – while 10 Setas reported irregular expenditure to the tune of a whopping R70.5m. The conclusion, according to Sacci, was that the financial statements of the Setas had shown that there was potential for these training authorities to spend more money on training people and assisting in filling the skills gap that leaves many South Africans unemployed. The report also highlighted that there was a need for better internal and external controls in some of the Setas. “Better compliance with the law and the management of the Setas should be the focus for these organisations to meet the mandate that they have been given,” said Roos and Sebati.